User Account

All Pages

elasticity, Microeconomics

Assignment Help:
-1-
ASSIGNMENT #1
The demand function for Product X is given by:
Qdx = 80- 2Px- 0.05P²x -0.2Py + 4Pz + 0.01I+ 2A
Where:
Px
Price of good X
$120.00
Py
Price of related good y
$100.00
Pz
Price of related good z
$40.00
I
Income
$7000.00
A
Advertising
$250.00
a. (i) Calculate the own Price elasticity of demand (PED) for Good X.
(ii) Discuss whether revenue can be increased by increasing the price of Good X?
(iii) Illustrate on a well labelled demand graph for Product X, the Total Revenue earned when Price is equal to $120.00
[8 marks]
b. (i) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Y.
(ii) Using your answer for b. (i), explain the relationship between Good X and Good Y. (Substitute, Complement etc)
(iii) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Z.
(iv) Using your answer for b. (iii), explain the relationship between Good X and Good Z. (Substitute, Complement etc)
(v) Based on the solutions for parts b. (i) to (iv) above, suggest one example of an actual agricultural product that fits the description for each of the following: Product X, Product Y and Product Z.
[13 marks]
c. Consider the following two situations:
? Situation 1: There is a fifteen percent (15%) increase in the price of Good Z (Pz).
? Situation 2: There is a sixty percent (60%) decrease in the price of Good Y (Py).
-2-
Both situations highlighted above, will affect the Total Revenue earned by Producers of Good X. Explain which situation is more beneficial, to the producers of Good X, from a Total Revenue earned perspective.
[5 marks]
d. (i) Calculate the Income elasticity of demand (YED) for Good X.
(ii) Explain whether Good X is a normal good or an inferior good.
[4 marks]
e. Assume that the own Price elasticity of demand (PED) for Good X is -2 and the Income elasticity of Demand (YED) for Good X is 3.
(i) Calculate the percentage change in consumption that will occur, when income declines by twenty percent (20%) .
(ii) Using the demand function presented for Good X above, determine the new quantity of Good X demanded when income declines by twenty percent (20%) , and the Income Elasticity of Demand (YED) for Good X is 3.
[5 marks]
f. Suppose that the Cross-price elasticity of demand (XED) between Good X and Good Z is 4.
(i) How much would the price of Good Z (Pz) have to change in order to increase the consumption of Good X by twenty five percent (25%)?
(ii) Use a well-labelled illustration of the demand curve for Good X to show the effect on the demand for Good X, of the change in the Price of Good Z (PZ) as calculated in f. (i) above.

Related Discussions:- elasticity

Limitations of Valence Bond Theory, Valence Bond Theory Explains, but does ...

Valence Bond Theory Explains, but does not predict the shape. Valence Bond Theory Cannot explain colour and spectra. Valence Bond Theory Qualitative explanations; does not expl

Why international markets tend towards oligopolis structure, Why do so many...

Why do so many international markets tend towards oligopolist structure? Definition of oligopoly - few and large firms with market power Basic assumptions of oligopoly

Homework, Do not submit more than 1 file in the Canvas submission link. A f...

Do not submit more than 1 file in the Canvas submission link. A few years ago peanut farmers in India experienced a super-bumper crop due to favorable weather conditions. Initially

Money, what is money? functions

what is money? functions

Iso, what is an iso curve

what is an iso curve

Supply and demand, Suppose scientists discover that eating soybeans prevent...

Suppose scientists discover that eating soybeans prevents cancer and heart disease

What do you meant by fiscal policy, Question 1: (a) Describe what is Ec...

Question 1: (a) Describe what is Economic growth and describe its relationship with standard of living? (b) Assuming you are the government economist, what policy measures

Calculate the annual cost to entire industry from closures, 1.  National Ma...

1.  National Marine Fisheries Service is considering closing a large area of federal waters to fishing in Alaska due to negative interactions of fishing with endangered Steller sea

Bain limit price theory, #question.case study of bain limt price theory

#question.case study of bain limt price theory

Capital intensive operations, Where minimum efficient scale is very huge fo...

Where minimum efficient scale is very huge for capital intensive operations, it may be more cost effective to allow one company to spread its fixed costs over a very huge number of

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd